AEC a boon to distribution firms: DKSH

Jonathan Guyett, head of supply chain management, deputy head of the consumer-goods business unit, and member of group management at DKSH Management (Thailand), said that with the establishment of the AEC, companies would more easily be able to raise capital, employ workers thanks to the free movement of labour, transport products across borders and generally conduct business in the region.
Moreover, it could lead to increasing investment in transport infrastructure across the region, such as the development of road networks within core connected AEC member countries, such as Singapore, Myanmar, Malaysia, Vietnam, Cambodia and Laos, as well as Thailand.
“We believe the AEC will provide a promising opportunity for companies. The Asean region is home to a population of more than 600 million. Already one in 11 citizens worldwide lives in Asean, a region that saw more than 300-per-cent growth in gross domestic product between 2001 and 2013.
“Leading institutes forecast that in 2025 as many as 125 million households in Asean will be part of the middle class, up from 67 million in 2015. This fast-growing middle class will demand high-quality consumer goods and healthcare products,” Guyett said.
In the medium term, this will facilitate the development of regional distribution centres across Asean, supporting multiple countries, he said, adding that the trend is also driven by increasing retail tourism between neighbouring countries.
“We are already seeing modern trade, such as hypermarkets, being built on key borders to capture the opportunities of retail tourism in Thailand. This will need to be supported by suppliers developing more regional distribution, giving rise to increased distribution-centre activity on border areas,” Guyett said.
“For a period of time, countries with higher labour and real-estate costs will outsource their distribution centres to lower-cost countries with new or expanded distribution centres. An example could be that a distribution centre in Johor Baru [in Malaysia] will cover Singapore,” he explained.
With its central location, Thailand has the potential to further develop its status as a regional hub. The AEC will make it easier for Thai companies to expand to neighbouring countries, thereby further increasing inner-Asian trade, said the senior manager.
Moreover, it will lead to harmonisation of customs processes, and eventually free, duty-free movement of goods.
Great progress has been made to create a single economic market. At the same time, true harmonisation may only be achieved in the long term as there are still barriers and differences in the way of doing business in Asean markets, he forecast.
To be successful in a new or existing market, companies need to have in-depth market knowledge. Leapfrogging the long-term investment of building this expertise, a long-term strategy with a regional growth partner like DKSH is the best way to be successful in Asean, he said.
“More than 10 years ago, it was a conscious decision to invest in our presence in Asean – and it proved to be the right one. We will continue investing in our scalable platform across Asean,” Guyett said.
DKSH, which is headquartered in Switzerland, has 720 business locations in Asia and 30 in Europe and the Americas. The company serves 500,000 customers, based on exclusive distribution contracts with 5,500 clients globally.
Last year, DKSH generated net sales of 9.8 billion Swiss francs (Bt353 billion), of which 96 per cent came from Asia-Pacific markets.
Asean plays an important role for DKSH, with a majority of its business coming from the region.
Thailand is DKSH’s single largest market in terms of employees and revenue.
In the past 12 months, DKSH has opened a number of state-of-the-art distribution centres in Asean.